Foreign exchange market
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is the largest and most liquid financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in April 2007 by the Bank for International Settlement
The foreign exchange market is unique because of
- its trading volumes,
- the extreme liquidity of the market,
- the large number of, and variety of, traders in the market,
- its geographical dispersion,
- its long trading hours: 24 hours a day except on weekends (from 3pm EST on Sunday until 4pm EST Friday),
- the variety of factors that affect exchange rates.
- the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
- the use of leverage
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the BIS, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this.
Buying and Selling
Financial market is a mechanism that allows people to easily buy and sell (trade) market instruments at low transaction costs and at prices that reflect efficient markets. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.
If you believe value of a market instrument is going to increase, then you would buy the instrument and at one point in the future you would sell it for a higher price. This is the basic motivation for trading on financial markets.
When is the market open for trading?
You can trade from Sunday 17:00 to Friday 17:00 New York local time. Virtual trading is open at all times. Please visit http://www.timeanddate.com/worldclock/city.html?n=179 to check New York local time. The following approximate market schedule is based on New York local time: Japan markets open at 19:00 followed by Singapore and Hong Kong that open at 21:00. European markets open in Frankfurt at 2:00, while London opens an hour later. New York markets open at 8:00 (NYSE opens at 9:00). European markets close at 12:00 and Australian markets start again at 18:00.
Risk Warning
Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. More over, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you.
